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                                                                    Exhibit 10.1


                              EMPLOYMENT AGREEMENT


     THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the 23rd
day of July 2004 (the "Effective Date") by and between JOHN KETT ("Kett") and
INSURANCE AUTO AUCTIONS, INC., an Illinois corporation ("Company").

                                    RECITALS

     WHEREAS, the Company desires to continue its employ of and to promote Kett
and Kett desires to continue in the Company's employ and to accept the Company's
promotion upon the terms and conditions set forth below.

     NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:

     1. EMPLOYMENT. The Company hereby promotes Kett, and Kett hereby accepts
the promotion, as Senior Vice President, Planning & Business Development, whose
duties include overseeing the business development aspects of the Company and
its affiliated companies. Kett shall be an executive of the Company and shall be
subject to the direction and control of the President and Chief Executive
Officer of the Company and the Board of Directors of the Company (the "Board").
Kett shall devote all of his business time and services to the business and
affairs of the Company. Kett shall also perform such other executive-level
duties consistent with his position as Vice President, Business Development as
may be assigned to him from time to time by the Chief Executive Officer,
including serving as an officer and/or director of the Company's operating
subsidiaries. The duties and services to be performed by Kett hereunder shall be
substantially rendered at the Company's principal offices as determined by the
Board, except for reasonable travel on the Company's business incident to the
performance of Kett's duties.

     2. COMPENSATION. As compensation for Kett's services provided hereunder,
the Company agrees to provide the following compensation:

     2.1. BASE SALARY. While this Agreement is in effect, the Company agrees to
pay to Kett a base salary at the rate of $175,000 per annum commencing on the
date of promotion ("Base Salary"). The Base Salary shall be subject to annual
review by the Board and any committee thereof ("Committee") or the Compensation
Committee and may be increased by the Board in their sole and absolute
discretion but may not be decreased. Such salary shall be payable to Kett in
such equal periodic payments as the Company generally pays its employees, but in
no event less frequently than monthly.


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     2.2. INCENTIVES. As additional compensation for performance of the services
rendered by Kett during the term of this Agreement, the Company will pay to
Kett, in cash, a performance bonus equal to fifty percent (50%) of Kett's annual
salary based upon the achievement of objectively quantifiable and measurable
goals and objectives which shall be determined, in advance, by the Compensation
Committee of the Board with respect to each fiscal year of the Company. This
amount is hereinafter referred to as "Incentive Compensation."

     2.3. OPTIONS. The Company shall cause the Committee delegated by the Board
to administer the Option Plan (as defined below) to grant to Kett an option to
purchase 30,000 shares of the Company's common stock (the "Option"). The Option
shall be granted under the Company's 2003 Stock Incentive Plan, as amended (the
"Stock Incentive Plan"). The exercise price of the Option granted pursuant to
this Section 2.3 shall be equal to 100% of the fair market value of the common
stock on the close of business on the day that the grant becomes effective
subject to the vesting and termination provisions as described below. The Option
shall become exercisable in four equal annual installments beginning on the
first anniversary of the grant date, and, except as provided below, shall be
subject to the usual terms and conditions of options issued pursuant to and in
accordance with the Option Plan.

     2.4. BENEFITS. During the term of his employment or for such time as
otherwise provided in this Agreement, Kett shall be entitled to participate in
such vacation, auto allowance, benefit plans, fringe benefits, life insurance,
medical and dental plans (beginning on the first day of employment), retirement
plans and other programs as are offered from time to time by the Company and are
described in the Company's employee benefit handbooks. Kett shall be entitled to
four weeks of paid vacation each calendar year, subject to any limitations on
carryover of unused vacation generally applicable to employees. Kett shall be
authorized to incur necessary and reasonable travel, entertainment and other
business expenses in connection with his duties hereunder. In connection with
expenses pursuant to this Section 2.4, the Company shall reimburse Kett for such
expenses upon presentation of an itemized account and appropriate supporting
documentation, all in accordance with the Company's generally applicable
policies.

     2.5. INDEMNIFICATION. The Company shall indemnify Kett in accordance with
the terms of the Company's standard form of Indemnification Agreement.

     3. TERMINATION.

     3.1. AT WILL NATURE OF EMPLOYMENT. Employment with the Company is not for a
specific term and can be terminated by Kett or the Company at any time for any
reason, with or without cause. Any contrary representations that may have been
made or that may be made to Kett are superseded by this Agreement. In addition,
this Agreement shall terminate by reason of Kett's death or the substantial
inability of Kett, by reason of physical or mental illness or accident, to
perform his regular responsibilities hereunder indefinitely or for a period of
one hundred eighty (180) days (a "Disability").

     3.2. COMPANY'S OBLIGATIONS ON TERMINATION APART FROM A CHANGE OF CONTROL.


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          (a) NO OBLIGATIONS OTHER THAN AS REQUIRED BY LAW FOR VOLUNTARY
TERMINATION OR CAUSE. The Company shall have no obligations to pay Kett any
severance payments or continue to cover Kett and/or his beneficiaries under the
Company's health plan (other than as required by law) if this Agreement is
terminated for any of the following reasons:

               (i) VOLUNTARY TERMINATION. Kett voluntarily terminates this
          Agreement; or

               (ii) CAUSE. The Company terminates Kett's employment at any time
          during the term of this Agreement for Cause. For purposes of this
          Agreement, "Cause" shall mean:

                    (A) the willful and continued failure of Kett to perform
               substantially his duties with the Company or one of its
               affiliates (other than any such failure resulting from incapacity
               due to medically documented illness or injury), 30 days after a
               written demand for substantial performance is delivered to Kett
               by the Board which specifically identifies the manner in which
               the Board believes that Kett has not substantially performed his
               duties; or

                    (B) the willful engaging by Kett in illegal conduct or
               misconduct, which is injurious to the Company,

          in each case as determined in the good faith opinion of the Board.

          (b) DEATH AND DISABILITY OBLIGATIONS. If this Agreement is terminated
due to death or Disability, the Company shall pay to Kett (or his legal
representatives as the case may be) the specific obligations as set forth below:

               (i) DEATH. Kett's employment shall terminate automatically upon
          Kett's death. If Kett's employment under this Agreement is terminated
          by reason of his death, the Company's sole obligation to Kett's legal
          representatives shall be to pay or cause to be paid, within thirty
          (30) days of the Date of Termination (as hereinafter defined), to such
          person or persons as Kett shall have designated for that purpose in a
          notice filed with the Company, or, if no such person shall have been
          so designated, to his estate, the amount of Kett's Accrued Obligations
          (as hereinafter defined). Any amounts payable under this Section
          3.2(b)(i) shall be exclusive of and in addition to any payments or
          benefits which Kett's widow, beneficiaries or estate may be entitled
          to receive pursuant to any pension plan, profit sharing plan, any
          employee benefit plan, equity incentive plan or life insurance policy
          maintained by the Company.

               (ii) DISABILITY. If the Disability of Kett occurs, the Company
          may give to Kett written notice in accordance with Section 6.1 of this
          Agreement of its intention to terminate Kett's employment. In such
          event, Kett's employment with the Company shall terminate effective on
          the 30th day after receipt of such notice by Kett



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<PAGE>

          (the "Disability Effective Date"), unless within the 30-day period
          after such receipt, Kett returns to full-time performance of his
          duties. The Company's sole obligation to Kett shall be payment of
          Accrued Obligations (as hereinafter defined) and the timely payment or
          provision of other benefits, including disability and other benefits
          provided by the Company to disabled executives and/or their families
          in accordance with such Company plans, programs, practices and
          policies relating to disability, if any.

          (c) OBLIGATIONS FOR ALL OTHER TERMINATION REASONS. For any other
reason, upon the termination of this Agreement and Kett's employment hereunder
apart from a Change of Control, the Company shall pay to Kett an amount equal to
the sum of (i) Kett's annual base salary at the time Kett's employment is
terminated; plus (ii) Kett's average annual bonus received over the eight (8)
fiscal quarters of the Company immediately preceding Company's fiscal quarter
during which Kett's employment is terminated, without exceeding Kett's target
bonus for Company's fiscal year during which Kett's employment is terminated,
provided, however, that Kett shall receive his target bonus if he is terminated
within his first eight (8) fiscal quarters after the Effective Date with the
Company; plus (iii) Kett's auto allowance for the Company's fiscal year during
which Kett's employment is terminated. In addition, the Company shall provide,
at Company's expense, continued coverage for Kett and his beneficiaries for a
period extending through the earlier of the date Kett begins any subsequent
full-time employment for pay and the date that is one (1) year after Kett's
termination of employment, under the Company's health plan covering Kett and
Kett's beneficiaries, provided that Kett properly elects coverage pursuant to
Title I, Part 6 of the Employee Retirement Income Security Act of 1974, as
amended ("COBRA").

     3.3. COMPANY'S OBLIGATIONS ON TERMINATION DUE TO A CHANGE OF CONTROL.

          (a) DEFINITIONS.

               (i) For purposes of this Agreement, a "Change of Control" shall
          mean:

                    (A) the acquisition by any individual, entity or group
               (within the meaning of Section 13(d)(3) or 14(d)(2) of the
               Securities Exchange Act of 1934, as amended (the "Exchange Act"))
               (for the purposes of this Section 3.3, a "Person") of beneficial
               ownership (within the meaning of Rule 13d-3 promulgated under the
               Exchange Act) of 50% or more of the voting power of the then
               outstanding voting securities of the Company entitled to vote
               generally in the election of directors (the "Outstanding Company
               Voting Securities"); provided, however, that for purposes of this
               subsection (a), any acquisition by any employee benefit plan (or
               related trust) sponsored or maintained by the Company or any
               corporation controlled by the Company shall not constitute a
               Change of Control; or

                    (B) individuals who, as of the date hereof, constitute the
               Board (the "Incumbent Board") cease for any reason to constitute
               at least a majority



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               of the Board; provided, however, that any individual (other than
               an individual whose initial assumption of office occurs as a
               result of an actual or threatened solicitation of proxies or
               consents by or on behalf of a Person other than the Board) who
               becomes a director subsequent to the date hereof whose election
               or nomination for election was approved by a vote of at least a
               majority of the directors then comprising the Incumbent Board
               shall be considered as though such individual were a member of
               the Incumbent Board; or

                    (C) consummation of a reorganization, merger or
               consolidation or sale or other disposition of all or
               substantially all of the assets of the Company (a "Business
               Combination") unless, following such Business Combination, (i)
               all or substantially all of the individuals and entities who were
               the beneficial owners of the Outstanding Company Voting
               Securities immediately prior to such Business Combination
               beneficially own, directly or indirectly, more than 50% of the
               voting power of the then outstanding voting securities entitled
               to vote generally in the election of directors, as the case may
               be, of the corporation resulting from such Business Combination
               (including, without limitation, a corporation which as a result
               of such transaction owns the Company or all or substantially all
               of the Company's assets either directly or through one or more
               subsidiaries) in substantially the same proportions as their
               ownership, immediately prior to such Business Combination of the
               Outstanding Company Voting Securities and (ii) at least a
               majority of the members of the board of directors of the
               corporation resulting from such Business Combination were members
               of the Incumbent Board at the time of the execution of the
               initial agreement, or of the action of the Board, providing for
               such Business Combination; or

                    (D) approval by the shareholders of the Company of a
               complete liquidation or dissolution of the Company.

               (ii) For purposes of this Agreement, "affiliated companies" shall
          include any company controlled by, controlling or under common control
          with the Company.

               (iii) For purposes of this Agreement, "Involuntary Termination"
          shall mean Kett's voluntary termination following (A) a change in
          Kett's position with the Company which materially reduces Kett's level
          of responsibility, (B) a reduction in Kett's Base Salary, or (C) a
          change in Kett's place of employment, which is more than seventy-five
          (75) miles from Kett's place of employment prior to the change,
          provided and only if such change or reduction is effected without
          Kett's written concurrence.

               (iv) For purposes of this Agreement, "Date of Termination" shall
          mean (A) if Kett's employment is terminated by the Company for Cause,
          or by Kett, the date of receipt of the Notice of Termination or any
          later date specified therein, as the case may be, (B) if Kett's
          employment is terminated by the Company for other than for Cause or
          Disability, the date on which the Company notifies Kett of such



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          termination and (C) if Kett's employment is terminated by reason of
          death or Disability, the date of death of Kett or the Disability
          Effective Date, as the case may be.

               (v) For purposes of this Agreement, "Accrued Obligations" shall
          mean the sum of (A) Kett's Base Salary through the Date of Termination
          to the extent not theretofore paid, (B) the greater of (I) the product
          of (x) any Incentive Compensation paid to or deferred by Kett for the
          fiscal year preceding the fiscal year in which Kett's Date of
          Termination occurs (annualized in the event that Kett was not employed
          by the Company for the whole of such fiscal year) and (y) a fraction,
          the numerator of which is the number of days in the current fiscal
          year through the Date of Termination, and the denominator of which is
          365 and (II) the average of the past three (3) years' annual bonuses,
          provided, however, that Kett shall receive his target bonus if he is
          terminated within his first eight (8) fiscal quarters with the Company
          (such greater amount being the "Highest Annual Bonus") and (C) any
          compensation previously deferred by Kett (together with any accrued
          interest or earnings thereon) and any accrued vacation pay, in each
          case to the extent not theretofore paid. Notwithstanding the
          foregoing, in no event will Kett be entitled to a duplication of any
          Incentive Compensation payments.

          (b) SEVERANCE BENEFITS FOR TERMINATION WITHIN TWO (2) YEARS OF A
CHANGE OF CONTROL. If Kett's employment with the Company terminates by reason of
Kett's Involuntary Termination (as defined in Section 3.3(a)(iii) above) or
termination by the Company without Cause (as defined in Section 3.2(a)(ii))
above) within two (2) years of the effective date of the Change of Control, Kett
shall be entitled to receive the following:

               (i) Company must pay Kett an amount equal to 150% of the sum of
          (A) Kett's Base Salary and (B) his Highest Annual Bonus;

               (ii) Company shall also pay Kett any Accrued Obligations; and

               (iii) Company shall provide, at its expense, continued coverage
          of Kett and Kett's beneficiaries for eighteen (18) months after the
          Date of Termination or until Kett commences any full-time employment,
          whichever comes first, under the Company's health plan covering Kett
          and Kett's beneficiaries, provided, however, that Kett properly elects
          coverage pursuant to COBRA.

          (c) SEVERANCE BENEFITS FOR TERMINATION AFTER THE SECOND YEAR FOLLOWING
A CHANGE OF Control. If Kett is terminated after the second year following a
Change of Control, the Company's obligations are as set forth in Section 3.2 of
this Agreement.

          (d) STOCK OPTIONS AFTER A CHANGE OF CONTROL. Subject to Section 2.3 of
this Agreement, all Kett's outstanding stock options to purchase Company common
stock shall accelerate and become fully exercisable.

     3.4. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY; EXCISE TAX GROSS-UP. A
"Gross-Up Payment" (as defined below) shall be made to Kett when payments of
compensation payable to



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Kett on termination of employment in connection with a Change of Control,
including, without limitation, the vesting of an option or other non-cash
benefit or property, whether pursuant to the terms of any applicable plan,
arrangement or agreement with the Company or any of its affiliated companies
(the "Total Payments") would trigger a tax imposed on Kett under Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Excise Tax").

     For purposes hereof, the Gross-Up Payment shall mean a payment to Kett in
such amount as is necessary to ensure that the net amount retained by Kett,
after reduction for any Excise Tax (including any penalties or interest thereon)
on the Total Payments and any federal, state and local income or employment tax
and Excise Tax on the Gross-Up Payment provided for by this Section 3.4, but
before reduction for any federal, state or local income or employment tax on the
Total Payments, shall be equal to the Total Payments.

     3.5. EXCLUSIVE BENEFITS. If more than one benefit due to termination
becomes payable under Sections 3.2 or 3.3, the greatest of such benefits shall
become payable to the exclusion of all other such benefits and shall be in lieu
of any other severance or similar benefits that would otherwise be payable under
any other agreement, plan, program or policy of the Company. Notwithstanding
anything in the prior sentence to the contrary, Kett shall be entitled to
benefits and incentives under all benefit plans and equity incentive plans,
policies and programs (except as expressly excluded herein, including, without
limitation, Section 2.3 of this Agreement) according to the terms of such
benefit plans and equity incentive plans, policies and programs as in effect
from time to time, including any acceleration of vesting provisions in the
Company's option plans, including any benefits under the Executive Severance
Plan for Officers.

     4. INVENTIONS AND CREATIONS. Kett agrees that all inventions, discoveries,
improvements, ideas and other contributions (collectively "Inventions") whether
or not copyrighted or copyrightable, patented or patentable, or otherwise
protectable in law, which are conceived, made, developed or acquired by Kett,
either individually or jointly, during his employment with the Company or any of
its subsidiaries, and which relate in any manner to the business of the Company
or any of its subsidiaries, shall belong to the Company and Kett does hereby
assign and transfer to the Company his entire right, title and interest in the
Inventions. Kett agrees to promptly and fully disclose the Inventions to the
Company, in writing if requested by the Company, and to execute and deliver any
and all lawful application, assignment and other documents which the Company
requests for protecting the Inventions in the United States or any other
country. The Company shall have the full and sole power to prosecute such
applications and to take all other action concerning the Inventions, and Kett
will cooperate fully within a lawful manner, at the expense of the Company, in
the preparation and prosecution of all such applications and in any legal
actions and proceedings concerning the Inventions. The provisions of this
Section 4 shall survive the termination of this Agreement.

     5. NON-COMPETITION; NON-SOLICITATION; CONFIDENTIAL INFORMATION.

     5.1. NON-COMPETITION AGREEMENT. Kett hereby acknowledges and agrees that
the Company actively engages in its business throughout all of North America.
Accordingly, Kett



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agrees that during the Non-Competition Period (as defined below), Kett will not,
directly or indirectly, whether as a partner, officer, shareholder, advisor,
employee or otherwise, promote, participate, become employed by, or engage in
any activity or other business similar to the Company's business or any entity
engaged in a business competitive with the Company's business in any state
within the United States as well as in Canada or Mexico. If Kett fails to comply
with the provisions of this Section 5.1, the Company may, in addition to
pursuing all other remedies available to the Company under law or in equity as a
result of such breach, cease payment of all severance benefits under Section 3.
For purposes hereof, "Non-Competition Period" shall mean the period commencing
on the date hereof and ending eighteen (18) months after the later of the
termination of Kett's employment hereunder or Kett's submission of his
resignation, or removal of Kett as Senior Vice President, Planning & Business
Development of the Company and the Company's payment and provision of Change of
Control severance benefits pursuant to Section 3.3.

     5.2. NON-SOLICITATION AGREEMENT. During the term of this Agreement and for
a period of eighteen (18) months thereafter, Kett shall not, directly or
indirectly, individually or on behalf of any Person (as defined below) solicit,
aid or induce (a) any then current employee of the Company to leave the Company
in order to accept employment with or render services for Kett or such Person or
(b) any customer, client, vendor, lender, supplier or sales representative of
the Company or similar persons engaged in business with the Company to
discontinue the relationship or reduce the amount of business done with the
Company. "Person" means any individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity, or any
department, agency or political subdivision thereof, or an accrediting body.

     5.3. CONFIDENTIAL INFORMATION. Kett acknowledges and agrees that he is in
possession of and will be exposed to during the course of, and incident to, his
employment by and affiliations with the Company, Confidential Information (as
defined herein) relating to the Company and its affiliated companies. For
purposes hereof, "Confidential Information" shall mean all proprietary or
confidential information concerning the business, finances, financial
statements, properties and operations of the Company and its affiliated
companies, including, without limitation, all customer and prospective customer
and supplier lists, know-how, trade secrets, business and marketing plans,
techniques, forecasts, projections, budgets, unpublished financial statements,
price lists, costs, computer programs, source and object codes, algorithms,
data, and other original works of authorship, along with all information
received from third parties and held in confidence by the Company and its
affiliated companies (including, without limitation, personnel files and
employee records). During the Non-Competition Period and at all times
thereafter, Kett will hold the Confidential Information in the strictest
confidence and will not disclose or make use of (directly or indirectly) the
Confidential Information or any portion thereof to or on behalf of himself or
any third party except (a) as required in the performance of his duties as an
employee, director or shareholder of the Company, (b) as required by the order
of any court or similar tribunal or any other governmental body or agency of
appropriate jurisdiction; provided, that Kett shall, to the extent practicable,
give the Company prior written notice of any such disclosure and shall cooperate
with the Company in obtaining a protective order or such similar protection as
the Company may deem appropriate to preserve the confidential nature of such
information. The foregoing obligations


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to maintain the Confidential Information shall not apply to any Confidential
Information, which is or, without any action by Kett, becomes generally
available to the public. Upon termination of any employment or consulting
relationship between the Company and Kett, Kett shall promptly return to the
Company all physical embodiments of the Confidential Information (regardless of
form or medium) in the possession of or under the control of Kett.

     5.4. SCOPE OF RESTRICTION. The parties have attempted to limit the scope of
the covenants set forth in Section 5 to the extent necessary. The parties
recognize, however, that reasonable people may differ in making such
determination. Consequently, the parties hereby agree that if the scope and
duration of such covenants would, but for this provision, be deemed by a court
of competent authority to be unreasonable or otherwise unenforceable, such court
may modify such covenants to the extent that such court determines to be
necessary in order to grant enforcement thereof as so modified.

     5.5. REMEDIES. The parties hereto recognize that the Company will suffer
irreparable injury in the event of a breach of the terms of Section 5 by Kett.
In the event of a breach of the terms of Section 5, the Company shall be
entitled, in addition to any other remedies and damages available and without
proof of monetary or immediate damage, to a temporary and/or permanent
injunction, without the necessity of posting a bond, to restrain the violation
of Section 5 by Kett or any Persons acting for or in concert with him. Such
remedy, however, shall be cumulative and nonexclusive and shall be in addition
to any other remedy which the parties may have.

     5.6. COMMON LAW OF TORTS OR TRADE SECRETS. The parties agree that nothing
in this Agreement shall be construed to limit or negate the common law of torts
or trade secrets where it provides the Company with broader protection than that
provided herein.

     5.7. SURVIVAL OF SECTION 5. The provisions of Section 5 shall survive the
termination of Kett's employment and the termination of this Agreement.

     6. GENERAL PROVISIONS.

     6.1. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid), sent by facsimile (with a copy sent via another method approved
herein), or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Company and to Kett at the addresses
indicated below:

     If to the Company:         Insurance Auto Auctions, Inc.
                                850 East Algonquin Road, Suite 100
                                Schaumburg, Illinois 60173
                                Phone:   847-839-3939
                                Fax:     847-839-3999


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<PAGE>

                                Attention:  General Counsel

     With copies to:            Katten Muchin Zavis
                                525 West Monroe Street, Suite 1600
                                Chicago, Illinois 60661
                                Phone:   312-902-5564
                                Fax:     312-577-8648
                                Attention:  Herb Wander, Esq.

     If to Kett:                John Kett
                                442 Hawthorne
                                Elmhurst, Illinois 60126


     With copies to:
                                --------------------------------

                                --------------------------------

                                --------------------------------

                                --------------------------------


or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.

     6.2. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this
Agreement embodies the complete agreement and understanding among the parties
and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.

     6.3. SUCCESSORS AND ASSIGNS. All covenants and agreements contained in this
Agreement by or on behalf of either party hereto shall bind such party and its
heirs, legal representatives, successors and assigns and inure to the benefit of
the other party hereto and their heirs, legal representatives, successors and
assigns.

     6.4. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by the laws
of the State of Illinois without giving effect to the provisions thereof
regarding conflict of laws.

     6.5. RESOLUTION OF DISPUTES; ARBITRATION. Should a dispute arise concerning
this Agreement, its interpretation or termination, or Kett's employment with the
Company, either party may request a conference with the other party to this
Agreement and the parties shall meet to attempt to resolve the dispute. Failing
such resolution within thirty (30) days of ether party's request for a
conference, the Company and Kett shall endeavor to select an arbitrator who
shall hear the dispute. In the event the parties are unable to agree on an
arbitrator, Kett and Company shall request the American Arbitration Association
("AAA") to submit a list of nine (9) names of persons



                                       10
<PAGE>

who could serve as an arbitrator. The Company and Kett shall alternately remove
names from this list (beginning with the party which wins a flip of a coin)
until one person remains and this person shall serve as the impartial
arbitrator. The arbitration shall be conducted in accordance with the National
Rules for the Resolution of Employment Disputes as promulgated by the AAA. The
decision of the arbitrator shall be final and binding on both parties. Each
party shall bear equally all costs of the arbitrator.

     The arbitrator shall only have authority to interpret, apply or determine
compliance with the provisions set forth in this Agreement, but shall not have
the authority to add to, detract from or otherwise alter the language of this
Agreement.

     6.6. REPRESENTATIONS OF KETT. Kett hereby represents and warrants to the
Company that his execution, delivery and performance of this agreement will not
violate or result in any breach of any agreement, contract, understanding or
written policy to which Kett is subject as a result of any prior employment, any
investment or otherwise. Kett is not subject to any agreement, contract or
understanding, which in any way restricts or limits his ability to accept
employment with the Company or perform the services contemplated herein.

     6.7. DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.

     6.8. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.

     6.9. AMENDMENTS AND WAIVERS. No modification, amendment or waiver of any
provisions of this Agreement shall be effective unless approved in writing by
each of the parties hereto. The Company's failure at any time to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and will not affect the right of the Company to enforce each and
every provision hereof in accordance with its terms.

     6.10. NON-ASSIGNMENT. This Agreement shall not be assigned by Kett.




         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.


                                  INSURANCE AUTO AUCTIONS, INC.

                                  By:      /s/ Thomas C. O'Brien
                                           -------------------------------------
                                  Name:    Thomas C. O'Brien
                                  Title:   President and Chief Executive Officer




                                       11
<PAGE>


                                           /s/ John Kett
                                           -------------------------------------
                                           JOHN KETT